US--HotFuel-Settlemen

Costco Wholesale Inc. has agreed to install gasoline pumps at stores in California and 13 other states that will adjust prices when fuel temperatures rise above the industry standard of 60 degrees.

The agreement would end Issaquah, Wash.-based Costco’s involvement in a lawsuit filed by consumers against oil companies and fuel retailers contending that they have knowingly overcharged consumers by selling fuel that contains less energy because it expands as it gets warmer.

The retailers adjust for warm temperatures when they buy at the wholesale level but not when they sell to consumers. Some estimates place the cost to consumers at $2 billion or more a year.

The proposed agreement, which was signed Wednesday, will be implemented over five years if approved by a federal judge in Kansas, where several lawsuits were consolidated.

The states where Costco would sell temperature-corrected fuel are Alabama, Arizona, California, Florida, Georgia, Kentucky, Nevada, New Mexico, North Carolina, South Carolina, Tennessee, Texas, Utah and Virginia. If any state forbids the installation of such pumps, Costco would be exempt there.

“This is fantastic news for consumers,” said Judy Dugan, research director of Consumer Watchdog, a Santa Monica-based advocacy group. “Costco is taking the lead in offering drivers gasoline that has the same amount of energy in every gallon, living up to its reputation as a consumer-friendly place to shop.”

Currently, Hawaii is the only state that requires service stations to install automatic temperature compensation devices on gas pumps.